Dry bulk freight rates 'may bounce back'

Dubai, October 15, 2008

The dry bulk freight rates are set to bounce back from their seven-month low by early next year, said a top official of a ship brokerage firm in Dubai.

Dry bulk shipping involves the movement of large quantities of coal, iron ore, wheat and other bulk commodities.

Shipbrokers and charterers are optimistic that stability in commodity prices will begin to make a return at the end of the year through to next year, resuscitating the dry bulk market currently at the brink of a downturn.

'We expect freight rates to bounce back, although this will not be sudden. We believe that commodity prices will start to rise up again towards the end of December,' Aazam Ghani, director of Ocean Bulk Shipping in Dubai told Emirates Business.

'At the beginning of the year, the market performance was robust, but the global economic crisis has hit commodity and bunker prices hard, affecting the dry bulk market.'

Following several years of a boom at the back of high demand from developing economies, led by China, freight rates have deeply fallen from record highs.

Demand from China, Europe and the US has fallen as a result of the global economic slowdown.

Ghani said people had stopped buying commodities because they are not certain of the market trends. 'Today if you buy for $10, the next day its $7, so nobody is ready to buy, unless the market stabilises. This has affected demand for vessels,' noted Ghani.

The global credit crisis is holding back activity within the dry bulk sector with many shippers cancelling their contracts with owners as it becomes harder for them to obtain credit to finance trade, he said.

Some analysts believe that the current financial turmoil that has affected the dry bulk sector could help in curbing fleet expansion especially when the sector is currently suffering from oversupply.